Babylon Labs filed a Temperature Check with Aave DAO on Monday. The proposal wants to integrate Trustless Bitcoin Vaults into Aave V4 so users can collateralize loans with native Bitcoin. No bridges, wrappers, or custodians would be needed.
How the Vaults Would Function
The system would let users lock native BTC directly through Babylon’s setup. Instead of converting Bitcoin to wrapped tokens or using cross-chain bridges, the Trustless Bitcoin Vaults secure collateral on-chain. Aave’s protocol would then accept this BTC as loan backing.
It’s a technical shift. The vaults handle verification while Bitcoin stays on its own chain. Users wouldn’t need to trust third parties to move their coins.
Why Bridges Are a Bottleneck
Bitcoin in DeFi almost always needs middlemen. Wrapped tokens rely on custodians. Bridges that move BTC across chains have failed before. Both options carry serious risk.
DeFi protocols avoid native BTC collateral because of this. Aave currently takes ETH and stablecoins but not Bitcoin. The proposal attacks that problem head-on by cutting out intermediaries.
Dao Process Timeline
A Temperature Check starts Aave’s governance flow. Community feedback is open for about a week. If there’s support, the idea moves to a formal proposal for token holder voting.
There’s no fixed deadline. But if the discussion goes well, a vote could happen within the next month. Token holders will have the final say on integration.
Real Stakes for Bitcoin Users
Bitcoin holders want to earn yield without giving up custody. Current options force them to wrap coins or trust bridges. This proposal solves both issues in one move.
It’s not guaranteed to work. The idea hasn’t cleared the first governance hurdle yet. But if it does, we could see native BTC in Aave before year-end. The community discussion is live now.
